Consumer Concern: Canadian Product Safety Measures May Finally Take Effect

In its 2007 Throne Speech, Canada's Conservative government promised to introduce measures on product safety "to ensure that families have confidence in the quality and safety of what they buy."

With the reintroduction of the Consumer Products Safety Act (CPSA), the original version of which died on the order paper when the government called an election in 2008, the government was well on its way to fulfilling that promise.

"The legislation will make Health Canada [the government's public health department] the equivalent of the U.S. Consumer Product Safety Commission," says Peter Pliszka, a partner at Fasken Martineau Dumoulin.

The heart of the CPSA is a general prohibition on manufacturing, importing, selling or advertising any "consumer product" that poses an unreasonable danger to human health or safety.

While drugs, medical devices and cars are not embraced by the CPSA, the legislation embraces practically everything else. It specifically defines a consumer product as any product that "can reasonably be expected to be obtained by an individual to be used for non-commercial purposes," including domestic, recreational and sports purposes.

Doubtless, the fact that product recalls and public notices of voluntary withdrawal are at a record high in Canada has made product safety and quality a leading issue for consumers and retailers. Yet there are lingering questions about the scope of the legislation, namely whether all its effects were intended.

Product Defined

The broad definition of "consumer product" means the legislation may impact a host of organizations that don't realize they're affected until it's too late.

"Under the present wording, even a product that is only occasionally used for noncommercial purposes could be covered," says Elizabeth McNaughton, a partner at Blake Cassels & Graydon. "You could, for example, have a company that sells commercial stoves to restaurants with the occasional sale to a consumer, and that makes the stove a consumer product."

The CPSA could also create liability for individuals.

"Everyone's for child safety," says Ogilvy Renault Partner Martha Healey. "But it's odd that someone could be held liable if they give their neighbor a used baby stroller, and the stroller is defective and an injury occurs."

To enforce the legislation, Health Canada will have broad powers to recall products or take other measures where there is danger to health and safety. These include authority to order tests and compile information necessary to verify compliance, to order corrective measures such as issuing public advisories, and to halt manufacturing, importing or advertising. The CPSA also requires manufacturers, importers, advertisers, sellers and testers of consumer products to document that they meet set-up and maintenance requirements.

"The legislation really adds an enormous level of infrastructure throughout the supply chain," Healey says.

There also are difficulties from a competitive standpoint.

"If Canada gets too far ahead of other major countries, especially in the recordkeeping and reporting areas,
multinationals operating here will have to incur the cost of establishing and maintaining separate policies for this country," McNaughton says.

But it is the notice requirements of the CPSA that may prove most problematic.

On Notice

The law requires manufacturers, importers and sellers to report "incidents" to Health Canada. An incident includes an "occurrence in Canada or elsewhere," such as a defect, a characteristic or incorrect information on a label that might reasonably be expected to result in death, serious injury or adverse effect on health. It also includes a recall initiated by a foreign entity, provincial government, public body or aboriginal government.

As Healey sees it, a strict construction of the legislation might produce a regime fraught with overreporting.

Backing up these measures are increased fines and penalties up to C$5 million (the current maximum is C$250,000 with unlimited fines for willful or reckless behavior). Compounding the severity is a provision that makes each day on which an offense is committed or continued a separate offense.

What the legislation appears to effect is a "seller beware" philosophy, conforming to the "precautionary principle" described in the preamble: "[A] lack of full scientific certainty is not to be used as a reason for postponing measures that prevent adverse effects on human health if those effects could be serious or irreversible."

Inexact Terms

The corporate community's criticism of the CPSA has been cacophonous. Complaints center around the broad levels of discretion it gives the minister and government officials; the lack of due process because inspectors don't need reasonable grounds to stop the manufacturing, importation or advertising of consumer products; the limited rights of appeal that appear to be wholly undefined; and the conflicts with other reporting requirements.

More particularly, the proposed legislation's language is not clear with respect to even the most important elements.

"The actual definition of terms like 'danger to human health or safety' and 'serious' incidents, for example, are so vaguely defined they could include almost anything," Healey says. "There's also no definition of what a 'recall' is."

And because goods cannot be sold if the seller ought to have known they could constitute a danger, it remains unclear whether retailers now have to inspect every single item they stock.

All of this forecasts a torrent of products liability litigation in Canada.

"While the CPSA doesn't alter the law of tort as it relates to negligence or the class action process, it will have indirect effects on the volume of litigation because as night follows day, lawsuits follow product recalls or other corrective action, which then become weapons in plaintiffs' arsenals," Pliszka says. "So to the extent that regulators now have the mandate and the tools to be proactive about safety risks and warning, it's very likely that we'll see more litigation."

However that may be, it appears fairly certain that the legislation will pass in its current form. Although the Conservative party forms a minority government, all parties support the CPSA, which is currently fast-tracking through Parliament. Tabled in January, the bill at press time had received second reading and been referred to the Health Committee. This means it has a good chance for third reading and passage by the fall.